The present invention relates generally to automated systems for performing transactions, such as financial transactions, using an integrated circuit device or card and, more particularly, to such transaction systems and methods of utilizing such transaction systems in a convenient and secure manner to permit such an integrated circuit device or card to be used in place of cash for the purchase of goods and/or services.
Goods and/or services are generally purchased by consumers and others utilizing credit cards, debit cards and/or cash or its equivalents, i.e., checks, money orders and bank drafts. Credit and debit cards have been used only relatively recently for this purpose. Cash, both coin and currency, has been the primary medium of exchange for goods and services for centuries. During the entire time, problems such as theft, fraud, counterfeiting and short-changing have always been present.
The present invention comprises a transaction system for integrated circuit devices, more particularly, integrated circuit cards or "smart cards" which are employed in the transaction system as a substitute for cash (i.e., currency or coins). The system of the present invention is superior to the use of cash because the transfer of value from the card for the purchase of goods or services occurs in an automated manner without the need to produce, transport, store or secure currency or coins. With the transaction system of the present invention, the integrated circuit card is as simple and as easy to use as cash and yet all transactions are secure and self-validating.
With the present invention, financial institutions and other entities issue one or more integrated circuit cards to each system user or cardholder. A cardholder, utilizing a specialized automated terminal, loads "value" in the form of a cash or dollar balance onto the integrated circuit card by debiting an existing financial account, such as a checking, savings, or money market account, or by inserting cash into the terminal. Thereafter, the cardholder may use the integrated circuit card to purchase virtually any type of goods and/or services.
When a cardholder wishes to purchase goods and/or services, the integrated circuit card is inserted into a terminal at the point of purchase or sale of the desired goods and/or services. After an automatic verification and validation process takes place, the cardholder may purchase goods and/or services by having the cost of the goods and/or services deducted from the balance stored in the integrated circuit card. The card is then removed from the terminal for subsequent purchases and/or loading of value.
The present invention comprises a system and method for determining value in a stored value transaction system. The stored value transaction system includes a local device, a collection device, a consolidation device and a settlement device each having its own device identification number. When a transaction is initiated within the stored value transaction system a first transfer device receives a transaction signal from a second transfer device and provides a certification signal in response. When the second transfer device receives a certification it encrypts it and sends the encrypted result back to the first transfer device. When the first transfer device receives the encrypted signal it also encrypts the certification signal and compares the two encrypted signals. A secure session may be conducted only if the two encrypted signals match. The first transfer device then encrypts a known value or password and sends the result to the second transfer device. The second transfer device decrypts the encrypted password and compares this value with the password known to the second transfer device. A secure session is established only if second set of values match. Thus, each of the two transfer devices performs its own independent verification prior to the establishment of a secure transaction. One of the two transfer devices may then enter into a transaction with a third transfer device. A secure transaction with the third device, and a further transfer of value, can occur only after a similar cross-verification process has been successfully completed with the third transfer device.